There are thousands of companies listed on stock exchange. It will be very difficult to track every stock that trades on an exchange. Therefore a small sample of the companies in the market is taken which is a representation of the whole market. This small sample is called an index. It is a statistical measure of the change in a portfolio of companies stocks which represent a portion of the overall market.
Sensex and Nifty are both large-cap index and from different exchanges that is BSE and NSE respectively. They are the indicators of market behavior and give an idea whether most shares have gone up or down. Usually, it is used as a benchmark for portfolio performance. The index gives the comparison of returns on investment with other asset class like real estate, gold, bond, or debt.
The index committee which is made up of academicians, financial journalists, mutual fund managers, and independent governing board members choose the ‘sample’ companies that are listed. Sometimes there is change in these listed companies and is notified.
National Stock Exchange Fifty is in short called Nifty50. It is a stock market index of National Stock Exchange and called Nifty50. NSE is located at Bandra Kurla Complex, Mumbai. It is a market-weighted stock index of 50 (previously 51) companies that are selected on basis of performance and financial soundness. These companies represent 24 industrial sectors.
- It came into existence in 1996 the base year 1995 = 1000
- Previously it was named CNX Nifty, but from Sept. 2015 it was renamed Nifty50.
- It is the biggest capital market of the country and one of the fastest.
- It introduced the fully automatic electronic trading system in the country.
- Depository services are offered through NSDL (National Securities Depository Limited).
- Nifty is calculated using the free-float market capitalization weighted method. 50 constituent stocks (51 previously) are chosen.
Let us start with Sensex. Full form of Sensex is “Sensitive Index”. It is a stock market index of Bombay Stock Exchange and called BSE Sensex. BSE is located at Dalal Street, Mumbai. It is a market-weighted stock index of 30 companies that are selected on basis of performance and financial soundness. They are large companies which are well established financially. These companies represent 13 industrial sectors.
- It came into existence in 1986, the base year 1978-79 = 100.
- It is older than Nifty. It is the oldest financial market in the country.
- Depository services are offered through CDSL (Central Depository Services Limited).
- Free-float market capitalization method is used for calculating Sensex. 30 constituent stocks are chosen.
- Free float stands for the stocks that are there for trading. Lock-in shares are not considered as free float.
- Market capitalization is the combined worth of all stocks of different companies that are within the stock exchange.
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